Ban OK'd on taxes on Net connections

By Associated Press | November 20, 2004

WASHINGTON -- Congress acted yesterday to block state and local governments from taxing connections that link consumers to the Internet for the next three years.

"Enacting this legislation is a big win for the majority of American Internet users," House Judiciary Committee chairman James Sensenbrenner, a Republican from Wisconsin, said as the House passed the bill by voice vote yesterday and sent it to the president for his signature.

The Senate made adjustments to the bill this week that freed the prohibition from a yearlong stalemate and pushed it toward passage.

The bill blocks taxation of all types of Internet connections, from traditional dial-up services to high-speed broadband lines.

States that had started taxing Internet access before the first ban, enacted in 1998, can continue collecting those fees. One exception is Wisconsin, which must drop its taxes in 2006 at Sensenbrenner's insistence.

The original ban didn't envision the invention of speedy DSL lines, and the law would require the few states that tax those connections to phase out their levies.

An earlier ban lapsed more than a year ago while lawmakers struggled to rewrite the regulations to include new technologies while ensuring that it wouldn't exempt all telecommunications activities from taxation.

The bill also blocks multiple state and local taxes from being imposed on goods purchased over the Internet.

The House voted last year to ban taxes on Internet access, but it could not find enough support in the Senate despite a strong push from the telecommunications industry. Proponents said they won't wait until the temporary ban runs out in 2007 to start trying again.

National Governors Association executive director Raymond C. Scheppach said that technologies may be changing too rapidly to enact a permanent law.

"Congress, consumers and the private sector should be able to revisit the issue and adjust to emerging technologies and market realities," he said. "It just makes sense."

The bill has no effect on an emerging Internet technology that some states want to tax as a traditional telecommunications service -- Voice Over Internet Protocol, which lets consumers use Internet technology like telephones.